What’s driving edge spending?

With 75% of organisations planning to boost their investments in edge computing in the next two years, we ask what’s spurring them to splash the cash and where and how will this money be spent…

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Three quarters of organisations plan to raise their spending on edge technology by an average of 37% over the next two years according to analyst firm IDC. But what’s driving this increase in investment?

There’s actually a number of factors. Edge computing is being driven by digital transformation and the growth of cloud computing, the internet of things (IoT), artificial intelligence (AI) and machine learning (ML) technologies and the rollout of 5G.

More interactions are now taking place at the edge, and many platforms that use the above technologies need more compute capacity there. Alongside this, the amount of data being stored at the edge is growing, prompting them to move storage and computing resources closer to where the data is being produced, processed, kept and consumed.

“The point of this is to improve the performance of those applications and technologies that need greater computing and storage power by bringing the resources closer to where the action’s taking place,” explains Marcus Torchia, Research Vice President Data and Analytics at IDC.

The benefits of edge computing

Edge computing has become increasingly popular due to the benefits it offers. The primary advantage in the eyes of decision-makers is improved customer and employee experiences through the collection of real-time data and use of AI analysis.

When questioned by analyst firm Gartner, IT leaders also noted that edge computing avoids the need for expensive network connectivity at remote locations in addition to network latency issues, and helps them meet the growing number of regulations that require local control of critical infrastructure.

“Edge computing drives bottom-line benefits through efficiency, and top-line benefits through new business interactions,” says Tom Bittman, Distinguished Vice President Analyst at Gartner. “For the bottom-line, edge computing increases automation, improves quality control, provides safety and protection due to its rapid response to threats, improves efficiency, reduces networking costs and can even reduce computing costs.

“For the top-line, edge computing increases business interactions, improves customer and employee experience. Again, the way to look at this is the benefits of driving digital transformation all the way to the edge – what can you automate, what new digital interactions can you create and monetise?”

What will business leaders invest in?

Brian Hopkins, Forrester’s Vice President Emerging Tech, believes the increased investment in edge computing will be spent on building out connected environments – initially networking and edge compute infrastructure, then software management including security and finally intelligence systems that run software workloads dynamically at various edge locations based on application performance needs.

“Initial investments will be in edge infrastructure, such as hyperconverged edge servers as well as edge software management solutions,” he says. “As these find value, we expect to see implementation of edge stream data processing and edge machine learning to gain momentum.”

Bittman points to the money going on systems integration, software and front-end consulting, noting that as-a-service models will be prominent.

Due to the diversity of the edge, most solutions today are first of a kind, or require customisation he notes, going on to say that he expects standard solutions to begin appearing as the trends make themselves known.

“As repeatable patterns and market adjacencies emerge, more standard vertical offerings (think solutions targeting retail chains), and horizontal solutions (think distributed edge node and data management) will emerge. Then software platforms and solutions will dominate.

“Hardware itself will tend to be a small percentage of spend, but there will be plenty of custom niches where hardware will need to be designed for specific use cases,” he says. 

Which industries and regions are leading the charge?

Edge computing has diverse use cases and analysts expect that the largest investments will go wherever there’s a big opportunity to automate and save money, or to increase revenue through experience and targeted sales.

According to IDC, sectors with the largest demand for edge computing include manufacturing and energy, as these have the most digitalised devices and systems and therefore the biggest opportunity for automation.

“Discrete manufacturing is a prime example of an industry where automation of production lines is coordinated across multiple facilities,” says Torchia. “Edge computing is being deployed in greenfield production environments. At the same time, older factories with existing edge infrastructure are getting retrofitted with modernised edge technologies.

“In manufacturing, production asset management and manufacturing operations represent the largest use cases by end user spending. In retail, the omni-channel operations use case continues to lead that industry.”

IDC Research forecasts the US, western Europe and China together comprise approximately 75% of the end user spending in edge technology investments. From a service provider perspective to enable edge services, hyperscalers are leading the investment trend but they’re being closely followed by a large number of telecom service providers.

From an enterprise point of view, the situation is very similar. As of last year, US organisations were the trailblazers, making 42% of the world’s edge computing investments. They were followed by western Europe (20%) and China (13.5%). The next closest region was Asia Pacific (excluding China and Japan), which made just over 6% of world’s edge investments in 2021.

Things look to stay very similar according to the analyst firm’s predictions up to 2025. However, while the US is expected to keep the top spot, the percentage figure has been predicted to drop to 40% as the number of investments made by the other regions grows.

Investing in edge? Think strategically

Most enterprises are embracing edge computing one use case at a time, but this can lead to inflexible solutions and sprawl. With this in mind, Bittman advises organisations to think strategically and plan beyond today’s use cases to what edge computing will need to do for you in the future.

“We tell end users to be proactive and build a strategic plan” says Bittman. “Build an edge computing vision that ties to other enterprise strategies such as digital business and cloud computing, work with business units to identify potential use cases collaboratively, focus on key edge computing challenges that you only want to solve once (how to manage distributed nodes and data to huge scale, how to ensure security, etc.), build standards and best practices that are reused and manage the change and growth.

“Designing your solutions for extensibility is critical,” he continues. “Failures tend to happen due to use-case-creep and solutions that aren’t extensible, failure to scale or to plan to manage data. Unlike data centres, where the goal is to preserve data, the goal at the edge is to process and destroy data as quickly as possible – only a small portion will be preserved or forwarded,” he notes.

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